5 Stocks Ready to Break Out - views

DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players who can ultimately push the stock significantly higher.

One example of a successful breakout trade I flagged recently was biopharmaceutical player Sarepta Therapeutics (SRPT), which I featured in Nov. 25's "5 Stocks Poised for Breakouts" at $15.60 share. I mentioned in that piece that shares of SRPT had gapped down sharply from $37.80 to under $12 a share with heavy downside volume. Following that gap down, shares of SRPT had started to rebound sharply and the stock was quickly moving within range of triggering a big breakout trade above its gap-down-day high at $16.70 a share.

Guess what happened? Shares of SRPT didn't wait long to trigger that breakout, since the stock took out that key overhead resistance level the following trading session. Since that breakout triggered, this stock has never looked back as SRPT has continued to uptrend consistently. Last December, SRPT hit an intraday high of $21.48 a share and then the stock pulled back to $17.50 a share. Even that pullback never took SRPT below its gap-down-day high of $16.70 a share. Shares of SRPT exploded higher on Thursday and hit an intraday high of $28.80 a share after the company released some drug data. That represents a ridiculous gain of over 60% from the time I wrote the article last November.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels and hold above those breakout prices, then it can easily trend significantly higher.

One biopharmaceutical player that's quickly moving within range of triggering a major breakout trade is Ariad Pharmaceuticals (ARIA), an oncology company that focuses on the discovery, development and commercialization of medicines for cancer patients. This stock has been on fire over the last three months, with shares up a whopping 59%.

If you take a look at the chart for Ariad Pharmaceuticals, you'll notice that this has been trending sideways and consolidating over the last month, with shares moving between $5.92 on the downside and $7.75 on the upside. Shares of ARIA are gapping up here and starting to move within range of triggering a major breakout trade above the upper-end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in ARIA if it manages to break out above some near-term overhead resistance at $7.75 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 26.20 million shares. If that breakout hits soon, then ARIA will set up to re-fill some of its previous gap down zone from last October that started near $18 a share. If ARIA gets into that gap with strong volume, then this stock could easily tag $10 to $12 a share.

Traders can look to buy ARIA off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $6.32 or at $5.92 a share. One can also buy ARIA off strength once it starts to take out $7.75 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Coronado Biosciences

A biopharmaceutical player that's starting to trend within range of triggering a major breakout trade is Coronado Biosciences (CNDO), which focuses on the development of immunotherapy biologic agents for the treatment of autoimmune diseases and cancer. This stock has been in play with the bulls over the last three months, with shares up sharply by 52%.

If you take a look at the chart for Coronado Biosciences, you'll notice that this has been trending sideways and consolidating over the last few weeks, with shares moving between $2.52 on the downside and $2.88 on the upside. Shares of CNDO have started to flirt with the upper-end of its recent range today, after the stock tagged an intraday high of $2.91 a share with decent upside volume flows. That move is starting to push shares of CNDO into near-term breakout territory, and it's also moving the stock within range of triggering a much bigger breakout trade.

Traders should now look for long-biased trades in CNDO if it manages to break out above some key near-term overhead resistance levels at $3 to $3.15 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.82 million shares. If that breakout triggers soon, then CNDO will set up to re-fill some of its previous gap-down-day zone from last October that started near $7 a share. Some possible upside targets if CNDO gets into that gap with volume are $4 to $5 a share.

Traders can look to buy CNDO off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.65 to $2.52 a share, or near $2 a share One could also buy CNDO off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Stereotaxis

Another medical equipment player that's starting to trend within range of triggering a big breakout trade is Stereotaxis (STXS), which designs, manufactures and markets cardiology instrument control system in the U.S. and internationally. This stock has been on fire over the last three months, with shares up sharply by 58%.

If you take a look at the chart for Stereotaxis, you'll notice that this stock has been uptrending over the last month, with shares moving higher from its low of $3.11 to its recent high of $5.84 a share. During that uptrend, shares of STXS have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of STXS within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in STXS if it manages to break out above some near-term overhead resistance levels at $5.84 to $6.24 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.63 million shares. If that breakout triggers soon, then STXS will set up to re-fill some of its previous gap-down-day zone from last August that started at $10 a share. Some possible upside targets if STXS gets into that gap with volume are $8 to $9 a share.

Traders can look to buy STXS off any weakness to anticipate that breakout and simply use a stop that sits just below $4.50 or $4 a share. One can also buy STXS off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Northwest Biotherapeutics

Another stock that's starting to move within range of triggering a big breakout trade is Northwest Biotherapeutics (NWBO), a development-stage biotechnology company engaged in discovering, developing and commercializing immunotherapy products to treat cancers in the U.S. This stock has been in play with the bulls over the last three months, with shares moving higher by 26%.

If you look at the chart for Northwest Biotherapeutics, you'll notice that this stock has been uptrending strong over the last month and change, with shares moving higher from its low of $3.20 to its recent high of $4.62 a share. During that uptrend, shares of NWBO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NWBO within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in NWBO if it manages to break out above some near-term overhead resistance levels at $4.62 to $4.75 a share and then once it takes out some more key overhead resistance levels at $5 to $5.25 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 139,514 shares. If that breakout hits soon, then NWBO will set up to re-fill some of its previous gap-down-day zone from last November that started at $6.89 a share.

Traders can look to buy NWBO off any weakness to anticipate that breakout and simply use a stop that sits right around its 200-day moving average at $3.70 a share.. One can also buy NWBO off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

China Sunergy

My final breakout trading prospect is solar energy player China Sunergy (CSUN), which, together with its subsidiaries, engages in the design, development, manufacture and marketing of solar cells and modules in the People's Republic of China and internationally. This stock has been moving higher over the last three months, with shares up by just over 23%.

If you look at the chart for China Sunergy, you'll notice that this stock recently formed a double bottom chart pattern at $5 to $5.05 a share. Following that bottom, shares of CSUN have started to uptrend with the stock moving back above its 50-day moving average. That uptrend has now started to push shares of CSUN within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in CSUN if it manages to break out above some near-term overhead resistance levels at $7.62 to $7.65 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 835,321 shares. If that breakout triggers soon, then CSUN will set up to re-test or possibly take out its next major overhead resistance levels at $8.50 to its 52-week high at $10.19 a share.

Traders can look to buy CSUN off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $6.12 a share. One can also buy CSUN off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.